The high cost of Judge Doyle Square

Madison Common Council members say the city simply can't afford what developer Bob Dunn wants it to pay for the controversial $174 million Judge Doyle Square project.

Dunn is seeking $75.5 million from the city, including $47.2 million in tax incremental financing and $28.3 million to pay for building a new parking garage and a bike center. The combined TIF request is about $1.4 million less than Dunn sought two weeks ago.

The proposal includes a 311-room hotel for Monona Terrace, 981 parking spaces, 140 high-end residential units, and more than 18,000 square feet of retail. The project is located behind the Madison Municipal Building on portions of two blocks owned by the city and includes the Government East parking garage. Dunn -- who left a message for Isthmus Monday -- could not be reached for comment.

The city is expected to conclude negotiations with him by mid-August, in anticipation of including funding in next year's budget. The council's Board of Estimates got an overview of where things stand on Monday night.

For many council members, the TIF request of more than $47 million is particularly hard to swallow. A decrease of just a few million is not likely to ease their concerns.

"It's too much of a reach for me," said Ald. Denise DeMarb. "That's just too big of a number. And I'm going to have to understand what is the public good. And I don't understand it right now."

Ald. Lisa Subeck echoed those sentiments: "I'm still not convinced this is needed," she said. "It feels like we're giving away a very valuable piece of land and then paying someone to build on it. I'd like to see some substantial public benefits... and to me, a hotel that someone can walk through is not a substantial public benefit."

Ald. David Ahrens, a critic of Judge Doyle Square, questioned George Austin, a consultant who is overseeing the project for the city, about whether Dunn has identified what the $29.9 million equity he's offering for the project is or named which banks will loan him the $68.8 million he says he will have. Austin says the city does not have those details.

Ahrens also asked why Dunn's financial figures show the project generating about $450,000 a year in taxes -- which would mean the property is worth about $12 to $13 million -- while the fair market value of the loan he’s seeking values it at about $62 million.

"He wants to pay property taxes as if it's a $13 million property, but he wants to value it as if it's a $62 million property," Ahrens explained Tuesday. A $62 million property would generate about $2 million a year in taxes, he adds.

David Schmiedicke, the city's finance director, told the Board of Estimates that Ahrens "put [his] finger on a point of discussion between the negotiating team and development."

Austin laid out five options for the council to consider, ranging from agreeing to Dunn's terms to suspending negotiations. In between those two extremes, Austin said the city could work to get the public contribution slightly lower or could downscale the project (perhaps by reducing the number of hotel rooms and amenities) in search of more significant cost reductions. The city could also "decouple" the two blocks, which would allow it to move ahead with the parking and residential elements but delay the hotel portion.

There was no vote at the Board of Estimates meeting, but the consensus seemed to be in the middle range of options, with alders wanting the city to reduce the cost as much as possible but not yet throw in the towel.

Ald. Larry Palm was unhappy that parking underneath the hotel would be paid for by the city but owned by the developer. "If it's our public money, we should own it," he said. "We have a very good parking utility. Why don't we operate it... and collect the revenue?”

But city officials said that would likely drive up the TIF request for the project, because the developer is counting on the parking revenue. Without that income, operating costs for the hotel would climb, requiring a higher city subsidy.

The council is facing growing public opposition to the project. Palm said he's heard from many constituents who have "been rabble-roused about this, excited that way too much money is being thrown at something that seems to be small."

Palm added: "I need to be able to articulate back to them what the costs are and what the benefits are."